Economic Basics Unit 4 part 2

Levels of economic study Economics is the scientific study of the means of producing and distributing goods and services so that they may be consumed by others. Microeconomics the part of economics concerned with single factors and the effects of individual decisions. Macroeconomics the part of economics concerned with large-scale or general economic factors, such as interest rates and national productivity.

Factors of Production Land – natural resources available for production. Labor – the human input into the production process Capital – goods or money used in the supply of other products Enterprise - entrepreneurs organize the factors of production and take risks

ECONOMIC SYSTEMS Procedure used to produce and distribute goods and services Answers the economic questions: WHAT is produced? HOW is it produced? FOR WHOM is it produced?

No Warm-up Take the reading from the grey table and finish filling out the chart from yesterday.

Economic Systems Command economy An economy in which most economic issues of production and distribution are resolved through central planning and control Market economy An economy that relies on a system of interdependent market prices to allocate goods, services, and productive resources and to coordinate the diverse plans of consumers and producers, all of them pursuing their own self-interest Traditional economy An economy in which customs and habits from the past are used to resolve most economic issues of production and distribution Socialist economy An economic and political system based on public or collective ownership of the means of production Mixed economy an economy that involves a degree of private economic freedom mixed with a degree of government regulation of markets In addition to understanding the basic terms associated with economics, you'll also need to familiarize yourself with different economic systems. An economic system is the way that production within a society occurs. It involves how goods or services are produced, distributed, and managed within the society. Here are the economic systems you should be familiar with. Note: Sometimes people conflate (confuse) some of these economic system terms with political system terms.

Economic Systems Gift Economy - A gift economy is one in which goods and services are freely given to others without any expectations for returns of the favor. Barter Economy - A barter economy is one in which goods and services are traded for other goods and services without an intermediary form of payment (like money).

Economics 101: The Bare Bones You Need In order to even discuss economics, you will need to know what the following terms mean: Production - Production is the creation of a good or service that has value to another individual. Distribution - Distribution is the method of getting the goods to the individuals who will use them. Consumption - The actual use of the goods that are produced is what is known as consumption. Often times, consumption produces some form of waste.

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Warm-up List the 4 factors of production. List the 3 questions all economies answer. Which type of economic system do you think is the best? Why?

Competition – when different businesses sell the same thing; struggle to get the best product at the lowest price. Market – a location that allows buyers and sellers to get together to buy/sell goods and services. Input – a resource or good that is used to make something else. Output – amount of something produced.

Circular flow – a model showing how goods, services, and money flow among sectors and markets in the US economy Supply and Demand - supply is the number of goods or services produced and demand is the number of consumers wanting the goods or services.

Household - The household is the independent unit of customers. Firm – a business or group that produces a good or service

free enterprise, laissez-faire – an economic system where individuals and businesses can compete for profit w/minimum gov’t involvement. profit motive – the driving force that encourages individuals and businesses to improve their material well-being. Scarcity – the situation of not having enough resources to satisfy one’s needs/wants. Monopoly – a sole provider for a good or service.

Gross Domestic Product – GDP the total market value of all final goods and services produced in a country during a single year. Gross National Product (GNP) measures the total economic output of a country, including earnings from foreign investments. Fiscal policy – how the gov’t uses taxes and spending to reach economic goals. Monetary policy – the manipulation of the money supply to affect the cost of credit, and economic growth. Done by the Federal Reserve.

High GDP  High average wages Controlled Inflation (how much the prices of goods, services and wages increase each year) Low Unemployment  Diverse industries Demographics (long life expectancy, low child mortality, low birth rate, etc.) Access to education, healthcare, clean water, technology Gender equality Low risk of disease High literacy rate Developed, underdeveloped, less developed – depends on if a nation meets a lot, some, or few of the indicators (on the left)

Business cycle - the fluctuation in economic activity that an economy experiences over a period of time. Basically defined in terms of periods of expansion or recession. Consumer price index - (CPI) measures changes in the price level of market basket of consumer goods and services purchased by households.

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Make a bingo chart like the one below, and fill in each square with a vocab word we just learned. Free space

Make flashcards for 5 words for which you think you’ll have a hard time remembering the definitions